Money is a hard thing to come by when you are a student. Though many have part time jobs, (nearly 80 percent, according to Quentin Fottrell of Market Watch), copious students end up in dire financial situations post-college, without jobs in their fields and student loan debt piling high.
According to LendEdu, 60 percent of college graduates in the U.S. have some form of student loan debt, accumulating to an average of $28,400 in debt per borrower.
So why are students taking out such tremendous loans?
The recession of 2008 dramatically affected the parents of many people going into college, which has caused them to provide less money towards their children's tuition (37 percent in 2011, 10 percent less than previous years). This, coupled with the fact that the price of education has risen by almost half in the last 10 years, makes getting an education an arduous task filled with overwhelming financial burden taken on at a very young age.
Though financial debt is not going to be completely solved with just a few tips and tricks, there are ways to make it much easier for yourself.
1. Start paying interest payments in college.
Though you do not have to start paying off student loan debt until six months after you graduate, the number that you see then is going to be much higher than the loan you originally took out. This is because the interest on it continuously builds up as you get your degree. Though interest rates vary, the rate on a typical parent PLUS loan is around seven percent, while the rate on subsidized unsubsidized federal loans is around 4.5 percent. If you make interest payments in college (which can be around $25-50 a month), you can massively cut down the debt that you will have to pay in the future.
2. Start a savings account early.
Using the 50/20/30 rule for budgeting, it is a good idea to put 20 percent of your paycheck into savings, with 50 percent going to living expenses and 30 percent going to flexible spending (also known as “fun money”). If you live in a dorm and have a meal plan, you have room to put more away into savings due to not having to directly pay for living expenses like rent, utilities and groceries. Putting a small portion of your paycheck away and letting it build will not only create good spending and saving habits, but will be a good safety net when you are looking for a job.
3. Find a roommate.
Though many people’s idea of a perfect living situation would be having a space of one's own, getting a roommate or two will drastically cut down the cost of expenses by splitting bills into halves or thirds. This will also allow you some financial freedom to build up your savings account and pay off debt early. Plus, depending on the location of your university, the cost of room and board might be more expensive than the cost of living off campus.
4. Monitor your spending.
Tracking what you spend money on is an excellent way to separate necessary expenses from useless ones. For example, if you go grocery shopping and see that the bill is much higher than you anticipated, go through your purchases and see what expenses can be spared. Oftentimes many items can be switched out for cheaper alternatives (i.e name brand vs. grocery store brand), or you may find that some expenses aren’t even needed.
One good way to track expenses is an Excel spreadsheet. Write down all of your monthly purchases and their prices, and check out which ones seem unnecessarily high — and yes, this includes limiting how much you spend when going out to eat or get coffee!
5. Apply for scholarships.
The window to apply for scholarships does not close when you exit high school. Private scholarships are often easy to apply for and readily available. Many colleges also give out institutional and departmental grants and scholarships for specific majors. According to Fastweb, a reputable source for national scholarships, 2.9 billion dollars of free federal grant money went unclaimed last year. Even though it may seem like a futile effort to apply for scholarships that are only worth a few hundred dollars, every contribution to decreasing student loan debt is well worth it.
6. Don’t spend a ton of money if it’s not an investment.
If you are shopping for things like clothes, household items or even small pieces of furniture, don’t spend money where you don’t have to. Shopping at secondhand stores and consignment stores will often lead to good finds at a lower cost. However, if you’re looking for something that you know you will be relying on (i.e. a car, a laptop for school, household appliances, etc.), it’s often better to spend a little extra money to ensure the quality of what you’re buying.
Frankly, there is not a panacea for financial burden. No single one of these tips is going to make your financial stress disappear. However, strengthening willpower and having financial self-control will make it easier to solve your burdens and get your education with less worry. Though education is expensive, it is well worth the price.
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